Does accepting a payment mean I’ve agreed to the termination?

When an employee’s services are terminated, it is not uncommon for employers to offer a “goodwill payment”, a lump sum made out of sympathy or appreciation rather than legal obligation.

Many employees wonder:

“If I accept this payment, does it mean I’ve agreed to the termination?”

And many employers assume:

“If the employee takes the money without protest, they’ve accepted it and can’t claim unfair dismissal.”

 

However, the Industrial Court of Malaysia has made it clear that accepting a goodwill payment does not automatically mean acceptance of termination and neither does it prevent the employee from filing a claim for unfair dismissal under Section 20(3) of the Industrial Relations Act 1967 (“IRA”).

 

CASE STUDY: JAMES HO THIAM HEE v. KOBE SHIPPING AND FORWARDING AGENCIES SDN BHD [2025] 1 ILR 430

 In this case, the claimant was terminated from employment and the company paid him RM6,000 as a sign of goodwill. The company later argued that by accepting the RM6,000 without protest, the claimant had accepted the termination and was therefore barred from bringing an unfair dismissal claim.

The Industrial Court rejected this argument. Referring to the ordinary meaning of “goodwill” i.e. ‘friendly or helpful feeling or attitude (Oxford Dictionary), the Industrial Court held that:

“..payment out of goodwill shall not absolve the company of any claim of unlawful dismissal without just cause or excuse or deter the claimant from escalating the matter to the court.”

 

The Industrial Court went on to state that:

• a goodwill payment is merely a gesture of helpful feelings;
• it is not tied to any term in the employment contract; and
• it does not restrict the employee’s statutory right to bring a claim under Section 20(3) IRA 1967.

 

Accordingly, the claimant was entitled to pursue his claim for unlawful dismissal despite having accepted the payment.

 

WHAT IS A GOODWILL PAYMENT?

A goodwill payment is not a contractual entitlement. It is a voluntary gesture from the employer which is typically meant to soften the impact of termination or show appreciation for past service.

It is not:

• a substitute for notice or termination benefits;
• a statutory obligation; or
• a legal settlement.

Unless expressly stated in writing as part of a mutual separation agreement or full and final settlement, a goodwill payment does not prevent an employee from bringing a claim for unfair dismissal.

 

WHEN DOES ACCEPTANCE BECOME BINDING?

The position changes if:

• the employer issues a written settlement agreement clearly stating that the payment is made in full and final settlement of all claims; and
• the employee signs it voluntarily with full understanding of its effect.

 

In such cases, the Industrial Court may find that the employee has waived their right to file a claim under Section 20(3) of IRA. In the absence of such documentation, the acceptance of payment alone is not sufficient to prove consent or waiver.

 

FOR EMPLOYERS: AVOID COSTLY MISUNDERSTANDINGS

Employers should take note of the case of JAMES HO THIAM HEE v. KOBE SHIPPING AND FORWARDING AGENCIES SDN BHD [2025] 1 ILR 430. If your intention is to resolve the matter conclusively, you must:

• prepare a settlement or mutual separation agreement signed by both parties;
• include a clear “full and final settlement” clause; and
• ensure the employee is not pressured or misled into signing.

Without these safeguards, your goodwill payment could be interpreted merely as compassion and not as a legal settlement.

 

FOR EMPLOYEES: DON’T ASSUME YOU’VE LOST YOUR RIGHTS

If you were dismissed and offered a “goodwill payment,” you may still:

• accept the payment without losing your right to claim, unless you signed a final settlement;
• file a representation under Section 20(3) of the IRA within 60 days from dismissal; and
• argue that the payment was made out of kindness, not obligation.

 

OUR VIEW

 The Industrial Court’s decision in JAMES HO THIAM HEE v. KOBE SHIPPING AND FORWARDING AGENCIES SDN BHD [2025] 1 ILR 430 is significant because it draws a clear line between compassion and consent. In doing so, it reinforces the idea that employment rights cannot be waived by implication or courtesy.

Too often, employers conflate acts of goodwill with settlement. This decision reminds us that the courts will not infer finality or waiver simply from silence or acceptance of money. Industrial justice demands clarity of intention and unless the employee’s waiver is express and unequivocal, the right to challenge dismissal remains intact.

What is particularly notable is the Court’s recognition that goodwill payments have a human, not contractual, dimension. They represent empathy rather than admission, and the law must not penalize either side for extending or accepting a humane gesture. At the same time, this ruling protects the integrity of Section 20(3) of IRA by ensuring that statutory rights cannot be diluted by informal practices in the name of kindness.